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January 30, 2013

Advisors and the Future: Threat and Opportunity Posed by Digital Natives

Brett King speaking at FSI OneVoice in San Diego on Tuesday.

The 9th annual FSI OneVoice conference was dominated by the group’s muscle-flexing over its growing membership and advocacy triumphs, but the dominant personality during the conference in San Diego was clearly Brett King. King is an author, consultant and founder of Movenbank, called the “first direct mobile bank,” in the U.K. and the U.S.

King facilitated a pre-conference leadership session on Monday, day one of the conference, and moderated a thoughtful panel of independent broker-dealer CEOs in the last public FSI session late Tuesday, but Tuesday morning he made a thought-provoking general session presentation called “Where Have All the Advisors Gone?” that focused on how advisors’ lives and businesses will change by 2020.

Pointing out that five years ago nobody knew what an iPad was, and that by 2016 some 80% of the world’s population will be able afford a smartphone, King suggested that changes in client behavior that are already taking place will significantly change the advisor-client relationship in the near future.

Take, for instance, banking. He argued that the smartphone will be the banking device of the near future. Instead of making a purchase with a smartphone that only gives you a receipt of the transaction, the technology he and others are developing will allow banking users to not only know what their bank balances are before and after they make a purchase, but also to track their spending habits. That will allow them to make more informed decisions about where and when they want to spend their money, but also to receive suggestions through their smartphone on what else they could do with their money. “Do you know how much you spend at Starbucks in a week, or a month?’ King asked the audience, suggesting that better, and immediate, knowledge of spending habits can lead users to change their behavior.

Since the rise of smart mobile devices allows clients and consumers to gain access to the investing information, for instance, that only advisors once had, they not only can make their own investing decisions, but can use free services like Covestor.com or etoro.com to follow the investing decisions of others, including professionals, and then mirror those decisions themselves. On such sites and on others, users not only can share their questions on all sorts of money issues with other users but then make investing decisions at the same time.

For advisors, this behavioral change of consumers and clients advising each other online provides an opportunity. “Good advice becomes great,” King said, when it is delivered at the right time, using constantly updated financial data. He also recommended that advisors make use of technological tools to “optimize the actual time of advice giving” by gathering client and prospect data ahead of an in-person or online meeting and then facilitating client execution of the advisor-provided advice afterward.

King showed a video depicting a toddler interacting with an iPad, becoming quickly frustrated when traditional print magazines didn’t operate the same way. Unlike the broker-dealer executives at FSI, digital natives have grown up with mobile devices and are more than comfortable sharing details of their lives, including financial ones, on social networks like Facebook. Digital natives, he said, are “the next growth opportunity for advisors,” who will be “irrelevant” if they can’t deliver device digitally. While they may still enjoy an occasional face-to-face meeting with their advisors, digital natives will not only expect to be able to communicate electronically with their advisors and to view their accounts online, but will also want to make decisions in real-time on their finances, just as they do in other areas.

By 2020, 40% of the mass affluent, King said, will be from generations X and Y. Not only will the industry need to produce digital-native advisors to serve those prospective clients, but those prospects and clients will also be making referrals to members of their networks online as well.

Finally, there will be a reassessment of the notion of risk. Already, King said, Under Armour has produced compression T-shirts—called the E-39—that have built-in sensors that provide a range of biometric data via Bluetooth to a mobile device that can analyze an athlete’s performance. There are also medical devices like as the Node, which looks like a Star Trek medical tricorder and gathers a range of data on a patient, again delivered wirelessly to a computing device that can analyze the data.

While you could easily imagine the health benefits of such devices to an individual, King also wondered if insurance companies will use data gathered from those devices to assess the underwriting risk of a particular person and perhaps deny coverage. Progress often comes at a price.

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